KGI Reflects Improving Conditions for Receivables Management Companies

The Kaulkin Ginsberg Index (KGI), the leading indicator of economic conditions affecting the accounts receivable management industry (ARM), has increased 3.7 percent to 1399.3 during the second quarter of 2007. The KGI is down 5.0 percent from 1472.5 at the same time a year ago.

While this currently reflects more challenging economic conditions for the ARM industry, the Index’s steady increases in the first half of 2007 point toward greater opportunity for receivables management companies later in the year.

The KGI’s most notable change in the second quarter was the 14 percent increase in total Market Cap of the five ARM stocks included in the Index. Generally speaking, positive gains in ARM companies’ stocks signal upbeat expectations for future financial performance across the industry.

The Market Cap data for ARM stocks in the second quarter of 2007 reflect higher revenue for four of the five ARM companies assessed by the Index over results from the same quarter in the prior year. Second quarter 2007 cash collections were also up (as much as 20 percent) for all five companies over the same period in 2006, and are expected to remain strong following several large purchases of distressed debt portfolios by these firms earlier in 2007.

In contrast to these positive indicators, however, the rate of revenue growth remains sluggish for many ARM companies due to continually elevated prices for bad debt portfolios. “Even in light of cooling stock prices for these five ARM companies early in the third quarter, rising consumer prices should drive consumer borrowing and continue to increase charge-off rates, both of which increase demand for ARM industry services,” said Michael Klozotsky, a Kaulkin Ginsberg Research Analyst.

The Index’s changes in Q2 2007 were caused by the following factors:

Variable	June 2007	Q2 Change	Effect on KGI
Unemployment Rate	4.5%	-2.8%	Up
Federal Funds Rate	5.25%	-0.2%	Down
Charge-off Rate	0.53%	3.9%	Up
Outstanding Consumer Credit	$2.460T	1.4%	Up
Total Market Cap of ARM Stocks	$2.50B	14%	Up
Bankruptcy Filings	193,641	-3.6%	Down
Consumer Price Index	208.4	1.5%	Up

For more information about the Kaulkin Ginsberg Index, please see www.kaulkin.com/research/kgi or call Michael Klozotsky at 301-907-0840 ext. 123.